Losing New York City – What Can We Learn from Amazon’s Failed HQ2

After a selection process that took a year and considered 238 cities, Amazon announced on November 23, 2018 its corporate headquarters, HQ2, will be based in Long Island City, Queens. A multi-billion dollar project, the development and subsequent activity at the new headquarters was estimated to create:

25,000 new jobs by 2029, and 40,000 new jobs by 2034

Average salary of $150,000 for new jobs

$3.6 billion over 15 years in investments

$27.5 billion over 25 years in tax revenue

Competition for the headquarters among the 238 cities was fierce, and the total construction was scheduled to be completed within 15 years.

Aside from the new Amazon employees occupying these jobs, approximately 1,300 construction jobs would be created each year to keep up with the building schedule. Including the construction workers and Amazon employees, this could have resulted in about 107,000 jobs created through the construction and operation of the facility.

Shortly after Amazon announced its decision to choose Long Island City, local activist groups and progressive politicians immediately fought back, insisting Amazon would be reaping billions in undeserved tax incentives — getting a “sweetheart” deal that mom and pop shops could only dream about. Although many of our small business clients have built successful businesses by selling products on Amazon, we have also heard grumblings that Amazon is a difficult partner, and while Amazon clearly benefits from its third-party seller relationships, it is the small businesses that must seek and secure working capital and loans to stay alive. Critics of the Amazon deal also questioned the optimistic job numbers and wondered aloud whether helping to expand the online giant’s ubiquitous retail presence is really in the best interest of New Yorkers.

Impact on New York City

Governor Andrew Cuomo and NYC Mayor Bill de Blasio were initially thrilled that Amazon chose New York City to build the new HQ2, which delivered on campaign promises to bring new business and economic stability to the state and city.

New York City and New York State worked together on the proposal to bring Amazon to Queens. An economic study conducted by REMI, Inc. determined that the HQ2 project had the potential to create $186 billion in GSP for the state over the next 25 years. REMI found that $14 billion in tax revenue will be generated, beginning with approximately $10.8 million by the end of 2019.

The agreement also included a 10,000 square-foot employment center, paid for by both New York and Amazon, to bring free technical training to residents of Queensbridge Houses. Other new developments in this jointly financed program include an intermediate public school, a waterfront esplanade and park, increased transportation initiatives, and other community needs.

Those opposed to HQ2 in their community feared that small businesses will be eliminated due to their inability to keep up with the low prices Amazon has to offer. One argument is that while thousands of jobs are created by Amazon, it is a net zero growth because other businesses will lose their employees. Politicians sought to rewrite the deal after the fact. Growing community opposition and a prolonged political battle, almost certain to damage Amazon’s brand, was not worth a failed renegotiation effort.

Amazon is planning to move forward with previously announced expansion plans in Northern Virginia and Nashville.

There are a few practical business lessons we can take from this failed effort to bring Amazon to New York.

Noone Likes a Bully

We live in particularly divisive times. Social media, public relations, communications all are critical to the success of any business expansion or move to a new location. It is important to engage allies and adversaries. Amazon may see itself as a benevolent savior of retail, but for many small, local businesses, it is an all-consuming monster — with cuthroat policies and prices made possible by its size that cannot effectively be matched by smaller, local competitors. When it appeared like Amazon was having its way with New York politicos, activists stepped into slay the Goliath.

Know When to Cut Bait

As a business owner, it is natural to be competitive and want to win… All the time. But some battles, even if you win, can prove costly, in terms of morale, goodwill, PR. Jeff Bezos had over 200 applications for HQ2, and although New York City was an ideal fit for many reasons, it was not worth a bruising and bloody battle. Amazon wisely recognized that the time may not be right for a New York expansion at this time, and it may be wiser to wait for the political winds to shift before forcing the issue.

About Todd William

Todd William is the founder and CEO of Reputation Rhino, an online public relations company in New York City serving small- and midsize businesses and individuals with a complete range of brand management and internet marketing services.